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Door opened wider to FDI in economy firefight; 100% foreign investment in telecom sector

Investment: Policy in 11 sectors relaxed,no decision on aviation.

In yet another bid to push aside the pall of economic gloom over the country,the UPA government Tuesday relaxed foreign direct investment limits across sectors,including allowing 100 per cent foreign investment in the telecom sector.

It also opened up the possibility of investments in defence production beyond the existing 26 per cent on a case-by-case basis but did not take any decision on raising the foreign investment limit in aviation.

The decisions were taken at a meeting chaired by Prime Minister Manmohan Singh and attended by Finance Minister P Chidambaram,Commerce and Industry Minister Anand Sharma,Home Minister Sushil Kumar Shinde,Food and Consumer Affairs Minister K V Thomas and Petroleum Minister Veerappa Moily.

Last September,the government had allowed 51 per cent FDI in multi-brand retail to woo global retailers.

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The latest decisions follow the country witnessing its weakest economic growth in a decade and a huge current account deficit last fiscal,hurting the rupee and making it the worst-performing currency in Asia.

Tuesday’s decision allows foreign telecom companies such as Vodafone and Telenor to operate without an Indian partner. Until now,foreign investors were allowed to hold up to 74 per cent in basic and cellular services.

“In the defence sector,currently,26 per cent FDI is allowed on approval route. That will remain. For proposals of FDI beyond 26 per cent involving state-of-the-art technology,they will be approved by the Cabinet Committee on Security,” the commerce minister told reporters after the meeting. The term “state-of-the-art technology” would be defined by the defence ministry. This means foreign firms can invest beyond 26 per cent if it would give India access to modern and highly developed technology. The defence ministry had in the past opposed moves to enhance the FDI cap citing security issues.


However,no decision was taken on the aviation sector and clarifications about FDI in multi-brand retail would be issued soon,Sharma said. “Decision on FDI in brown-field pharma and the clarifications regarding ownership would be discussed later,” he said. A cabinet note regarding Tuesday’s decisions would be moved within two or three days,a senior official said.

In all,FDI policy in 11 sectors was relaxed,including petroleum,natural gas and refining; commodity exchanges; power exchanges; stock exchanges; depositories corporation; single brand retail trading; courier services; asset reconstruction companies; credit information companies; besides telecom and defence.

Although it has been decided that the existing cap of 26 per cent FDI in the insurance sector would be raised to 49 per cent through the automatic route,it is subject to the approval of Parliament where the Insurance Bill is pending.


While the existing cap of 49 per cent FDI was retained for petroleum,natural gas and refining,commodity exchanges,power exchanges,and stock exchanges and depositories corporation sectors,they were moved to the automatic approval route from the FIPB approval route.

Up to 49 per cent FDI would be allowed in single-brand retail and telecom through the automatic route and FDI beyond 49 per cent would have to go to the FIPB for approval. Courier services would be approved through the automatic route too.

Shortly after the government announcement,Parliamentary Affairs Minister Kamal Nath told The Indian Express that he would convene an all-party meeting ahead of the Monsoon session of Parliament to build political consensus on pending legislations.

He is likely to get in touch with political parties Wednesday in this connection and announce the date of the all-party meeting. Nath said he was hopeful of getting the insurance bill through in the next session of Parliament.

First published on: 17-07-2013 at 02:22:34 am
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